[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-321126-105":59,"doc-detail-321126-en":130},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":123,"head_meta":125,"extra_data":127,"updated_unix":129},105,"en","the-japanese-edge-in-investment-the-financial-side","The Japanese Edge in Investment - The Financial Side","","Economic Commentary examines why Japanese manufacturers maintained an advantage in investment-related performance despite concerns over U.S. competitiveness in manufacturing. It reviews evidence on whether financial factors explain the “Japanese edge,” focusing on how economists measure the cost of capital and on competing study results. The commentary concludes that common claims—lower Japanese cost of capital, excessive reliance on low-cost debt, and large tax-code differences—are not supported by conclusive evidence and that market developments may further equalize capital costs.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/the-japanese-edge-in-investment-the-financial-side/321126/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/the-japanese-edge-in-investment-the-financial-side/321126.png","ImageObject",300,407,{"name":92,"@type":93},"Ava Thompson","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-23","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":39},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"Why is the Japanese advantage in manufacturing linked to financial factors?","Question",{"text":112,"@type":113},"The commentary argues that the U.S. competitiveness loss and Japan’s relative success have prompted policy interest in financial explanations, especially capital costs and investment incentives.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"What does the document conclude about evidence on the cost of capital in Japan?",{"text":117,"@type":113},"It states that, contrary to popular belief, there is no conclusive evidence that Japan’s cost of capital is low enough to explain the advantage.",{"name":119,"@type":110,"acceptedAnswer":120},"How does the commentary assess differences in U.S. and Japanese tax codes?",{"text":121,"@type":113},"It explains several tax-code contrasts but concludes that the U.S. and Japanese tax codes are not that different, so tax rules do not clearly account for a Japanese edge.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},321126,1790156146,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":39,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},1649267921044,"https://us-avatar.wpscdn.com/avatar/1800007509477c92dfb?_k=1786009248482753345","ECONOMICCOMMENTARY  \nThe dramatic loss of U.S.internationalcompetitiveness in manufacturingindustries has been of increasing con-cern to U.S.policymakers.A particularfocus of this concern has been the rela-tive success of Japanese manufacturers.Proposed policy actions to offset theloss have ranged widely,from manipu-lation of exchange rates,to tax reform,to policies aimed at altering the level ofinterest rates.  \nThe loss of American competitive-ness seems most acute in capital-intensive industries:industries inwhich cost reduction and productimprovement require high rates ofinvestment in both tangible and intan-gible assets.Possible explanations arethat 1)the cost of capital is lower inJapan,2)Japanese manufacturers util-ize greater amounts of low-cost debt,3)taxes are relatively burdensome in theU.S.,and 4)interest rates and otherpre-tax required rates of return arelower in Japan.  \nIn this Economic Commentary,wediscuss recent evidence on the impor-tance of financial factors in explainingthe Japanese edge.Overall,evidence onthe importance of particular financialfactors is mixed,due to the variety ofways that studies have gone aboutaddressing these issues.We concludethat,contrary to popular belief,1)thereis no conclusive evidence that the costof capital in Japan is low enough toexplain a Japanese edge,2)Japanesereliance on \"low-cost debt\"is not greatenough to explain an advantage,and 3)the U.S.and Japanese tax codes are notthat different.  \n                        March 1,1987  \nIt is possible,however,that capitalcosts are lower in Japan because ofother factors.In particular,there isevidence that agency costs and,possi-bly,pre-tax required rates of return arelower.Even so,ongoing changes in Jap-anese financial markets suggest thatthese differences may disappear in thenear future,further equalizing capitalcosts between the U.S.and Japan.  \n# Differences in Costs of CapitalThe cost of capital incorporates manyfactors that influence investment.While it is often presumed that the costof capital is lower in Japan,upon closeexamination,the evidence appearsinconclusive.In part,this is because ofthe different ways in which economistsattempt to measure the cost of capital.\n\nIn a widely cited study,Hatsopoulos(1985)measures the cost of capital asdefined by Hall and Jorgenson (1967)¹and concludes that from 1961 to 1984,the cost of capital was much lower inJapan(see chart 1).This conclusion isconsistent with the results of a studydone for the U.S.semiconductor indus-try in 1980.  \nMore recent studies,however,havecontradicted earlier conclusions.Andoand Auerbach(1985),for example,estimate costs of capital by utilizingbalance-sheet data.As they admit,theyare thus calculating ex-post(realized)rates of return rather than ex-ante(expected)rates of return.Ex-ante rateswould be more consistent with the con-cept of the cost of capital.They findthat,for the companies in their sample,the median costs of capital are 7.5 per-cent for Japan and 9.4 percent for the  \nThe views stated herein are those of the authorand not necessarily those of the Federal ReserveBank of Cleveland or of the Board of Governors ofthe Federal Reserve System.  \nThe Japanese Edgein Investment:TheFinancial Side  \nby William Osterberg  \nU.S.However,when they use marketdata on equity earnings rather thanbook earnings,the Japanese edge disap-pears.When they adjust for the effectsof corporate taxation,they stll con-clude that the Japanese do not have alower cost of capital  \nIn a 1986 study,Carliss Baldwintakes yet another approach to measur-ing costs of capital,focusing on theopportunities of multinational corpora-tions to take advantage of potential differences in national costs of capital.  \n1.See Robert E.Hall and Dale W.Jorgenson,\"Tax Policy and Investment Behavior,\"Ameri-rn Economic Review,vol.57,no.3 (June 1967),pp.391-414.For a discussion of the concept of thecost of capital,see Alan Auerbach,\"Taxation,Corporate Financial Policy,and the Cost of Capi-tal,\"Journal of Economi","cbCaimdk9D6mbvq7","https://ap.wps.com/l/cbCaimdk9D6mbvq7","pdf",1503046,"English","# Differences in Costs of Capital\n## Differences in Tax Codes","[{\"question\":\"Why is the Japanese advantage in manufacturing linked to financial factors?\",\"answer\":\"The commentary argues that the U.S. competitiveness loss and Japan’s relative success have prompted policy interest in financial explanations, especially capital costs and investment incentives.\"},{\"question\":\"What does the document conclude about evidence on the cost of capital in Japan?\",\"answer\":\"It states that, contrary to popular belief, there is no conclusive evidence that Japan’s cost of capital is low enough to explain the advantage.\"},{\"question\":\"How does the commentary assess differences in U.S. and Japanese tax codes?\",\"answer\":\"It explains several tax-code contrasts but concludes that the U.S. and Japanese tax codes are not that different, so tax rules do not clearly account for a Japanese edge.\"}]","The Japanese Edge in Investment - The Financial Side | PDF",1789958491,13]